Dodd-Frank: Making it Harder For You to Get a Mortgage

The Dodd–Frank Wall Street Reform and Consumer Protection Act, sarcastically known as Dodd-Frankery and Dodd-Frankenstein, was passed into law in response to the financial crisis and recession of 2008. It contains the most drastic changes to financial regulations since the regulatory reform after the Great Depression. Proposed by Obama in 2009 and signed into law in 2010, the Democratic bill was the handiwork of former Financial Services Committee Chairman Barney Frank (D-Mass.) in the House and former Banking Committee Chairman Chris Dodd (D-Conn.) in the Senate. It was supposedly going to stop banks from making loans to risky buyers who could not pay them back, reducing foreclosures. It was also supposed to change the rules so banks could no longer receive taxpayer-funded bailouts due to their poor business practices.

It hasn't worked out the way its Democrat proponents claimed. This is because the people who got us into this mess are the same ones who drafted the law. Dodd-Frank contains more of the same things that precipitated the financial crisis; government meddling in the mortgage business and financial markets. Lobbyists for special interests carved out loopholes, resulting in merely different lists of winners and losers. As one author in U.S. News & World Report observed, “These exemptions are less about protecting unsophisticated borrowers than about protecting the taxpayer-guaranteed business models of favored entities.” Hedge funds and some other firms lost big; they are now required to fill out a 192-page form that has been estimated to cost each firm $100,000-$150,000.

Speaking of winners or losers, most outrageously, Dodd-Frank didn’t bother to reform Fannie Mae or Freddie Mac, the biggest culprits for handing out mortgages to high-risk borrowers who should never have qualified for them. They received the largest bailouts of all financial institutions in 2008.

The 848-page-long act created numerous new federal agencies. It grossly expanded oversight by federal agencies to non-bank financial institutions and their subsidiaries. It required federal agencies to write 398 new rules in order to put the act’s 1,500 provisions into place. It will cost taxpayers millions to run all the new agencies and enforce the rules, and will hurt economic growth and harm the competitiveness of U.S. firms relative to their foreign counterparts.